Plain language law

New Zealand law explained for everyone

Companies Act 1993

Offences and penalties

383: Court may disqualify directors

You could also call this:

“Court can ban people from being company directors for misconduct”

The court can stop someone from being a director or manager of a company if they’ve done something wrong. This can happen if you:

  • Have been found guilty of a serious crime related to running a company
  • Have broken the rules in this law
  • Have been found guilty of certain tax crimes
  • Have been found guilty of exploiting workers or human trafficking using a company
  • Keep breaking the rules or don’t try to make sure the company follows the rules
  • Have cheated the company or not done your job properly as a director
  • Have been stopped from being a director in another country
  • Have become mentally unwell

The court can stop you from being a director forever or for a set time. They can only make it permanent or longer than 10 years in really serious cases.

If someone wants to ask the court to do this, they have to tell you at least 10 days before. You can go to court to defend yourself.

The Registrar, the FMA, the Official Assignee, or the company’s liquidator can ask the court to do this. They must tell the court about any important information.

Even if you might be in trouble with the police for what you did, the court can still stop you from being a director.

If you act as a director when you’re not allowed to, you’re breaking the law and can be punished.

This rule applies to companies in New Zealand and overseas companies.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM323252.

Topics:
Business > Industry rules
Business > Fair trading
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382: Persons prohibited from managing companies, or

“Who can't manage companies and for how long”

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384: Liability for contravening sections 382 and 383, or

“Penalties for acting as a director when disqualified or banned”

Part 21 Offences and penalties

383Court may disqualify directors

  1. Where—

  2. a person has been convicted of an offence in connection with the promotion, formation, or management of a company (being an offence that is punishable by a term of imprisonment of not less than 3 months), including an offence under section 138A, or has been convicted of a crime involving dishonesty as defined in section 2(1) of the Crimes Act 1961; or
    1. a person has committed an offence for which the person is liable (whether convicted or not) under this Part; or
      1. a person has been convicted of an offence under section 143A(1)(d) or 143B(1) of the Tax Administration Act 1994; or
        1. a person has been convicted of an offence under section 148 of the Tax Administration Act 1994 of aiding, abetting, inciting, or conspiring with another person to commit an offence against section 143B(1) of that Act; or
          1. a person has been convicted of an offence under section 351 of the Immigration Act 2009 (exploitation of unlawful employees and temporary workers) and the offence was enabled by, or otherwise related to, the use of a company; or
            1. a person has been convicted of an offence under section 98D of the Crimes Act 1961 (trafficking in persons) and the offence was enabled by, or otherwise related to, the use of a company; or
              1. a person has, while a director of a company and whether convicted or not,—
                1. persistently failed to comply with this Act, the Financial Markets Conduct Act 2013, the Takeovers Act 1993, or the takeovers code in force under that Act or, if the company has failed to so comply, persistently failed to take reasonable steps to obtain compliance with those Acts or the code; or
                  1. been guilty of fraud in relation to the company or of a breach of duty to the company or a shareholder; or
                    1. acted in a reckless or incompetent manner in the performance of his or her duties as director; or
                    2. a person has been prohibited in a country, State, or territory outside New Zealand from carrying on activities that the court is satisfied are substantially similar to being a director or promoter of or being concerned or taking part in the management of a body corporate; or
                        1. a person has become of unsound mind,—
                            1. the court may make an order that the person must not, without the leave of the court, be a director or promoter of, or in any way, whether directly or indirectly, be concerned or take part in the management of, a company permanently or for a period specified in the order.

                          1. The court may make an order under this section permanent or for a period longer than 10 years only in the most serious of cases for which an order may be made.

                          2. A person intending to apply for an order under this section must give not less than 10 days' notice of that intention to the person against whom the order is sought, and on the hearing of the application the last-mentioned person may appear and give evidence or call witnesses.

                          3. An application for an order under this section may be made by the Registrar, the FMA, the Official Assignee, or by the liquidator of the company, or by a person who is, or has been, a shareholder or creditor of the company.

                          4. Subsection (3B) applies on the hearing of—

                          5. an application for an order under this section by the Registrar, the FMA, the Official Assignee, or the liquidator; or
                            1. an application for leave under this section by a person against whom an order has been made on the application of the Registrar, the FMA, the Official Assignee, or the liquidator.

                              1. The Registrar, the FMA, the Official Assignee, or the liquidator (as the case may be)—

                              2. must appear and call the attention of the court to any matters that seem to him, her, or it to be relevant; and
                                1. may give evidence or call witnesses.

                                  1. An order may be made under this section even though the person concerned may be criminally liable in respect of the matters on the ground of which the order is to be made.

                                  2. If conduct by a person constitutes grounds for making an order under any 1 or more of this section, section 44F of the Takeovers Act 1993, and subpart 6 of Part 8 of the Financial Markets Conduct Act 2013, proceedings may be brought against that person under any 1 or more of those provisions, but no person is liable to more than 1 order under those provisions for the same conduct.

                                  3. The Registrar of the court must, as soon as practicable after the making of an order under this section, give notice to the Registrar that the order has been made and the Registrar must give notice in the Gazette of the name of the person against whom the order is made.

                                  4. Every person who acts in contravention of an order under this section commits an offence and is liable on conviction to the penalties set out in section 373(4).

                                  5. In this section, company includes an overseas company.

                                  Compare
                                  • 1955 No 63 s 189
                                  • 1988 No 236 s 4
                                  Notes
                                  • Section 383(1): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
                                  • Section 383(1)(a): replaced, on , by section 54 of the Companies Amendment Act 2014 (2014 No 46).
                                  • Section 383(1)(a): amended, on , by section 10(1) of the Regulatory Systems (Economic Development) Amendment Act 2019 (2019 No 62).
                                  • Section 383(1)(ba): inserted, on , by section 10(2) of the Regulatory Systems (Economic Development) Amendment Act 2019 (2019 No 62).
                                  • Section 383(1)(bb): inserted, on , by section 10(2) of the Regulatory Systems (Economic Development) Amendment Act 2019 (2019 No 62).
                                  • Section 383(1)(bc): inserted, on , by section 24 of the Worker Protection (Migrant and Other Employees) Act 2023 (2023 No 36).
                                  • Section 383(1)(bd): inserted, on , by section 24 of the Worker Protection (Migrant and Other Employees) Act 2023 (2023 No 36).
                                  • Section 383(1)(c)(i): replaced, on , by section 25 of the Securities Amendment Act 2006 (2006 No 46).
                                  • Section 383(1)(c)(i): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
                                  • Section 383(1)(ca): inserted, on , by section 14 of the Companies Amendment Act (No 2) 2006 (2006 No 62).
                                  • Section 383(1)(d): repealed, on , by section 25 of the Securities Amendment Act 2006 (2006 No 46).
                                  • Section 383(1A): inserted, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
                                  • Section 383(3): replaced, on , by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).
                                  • Section 383(3A): inserted, on , by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).
                                  • Section 383(3B): inserted, on , by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).
                                  • Section 383(4A): inserted, on , by section 25 of the Securities Amendment Act 2006 (2006 No 46).
                                  • Section 383(4A): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).